Examples of Workers’ Compensation Fraud (Spot, Prove, and Report)

Workers’ compensation fraud drains money from real injured workers and honest employers. In California, estimates put the annual cost at $1–$3 billion statewide and $30 billion nationally. Knowing what counts as fraud, how to report it, and what happens next helps people in Culver City make informed choices.

However, many people confuse honest mistakes with intentional fraud or don’t know where to report concerns.

Why Workers’ Comp Fraud Is Hard to Recognize

Many people struggle to identify workers’ compensation fraud in Culvert City, CA because it doesn’t always look obvious.

A simple paperwork error can resemble intentional fraud, and employees often assume fraud only happens when a worker fakes an injury, when in reality, employers and even medical providers can commit fraud too!

Others don’t realize they can report suspicious activity anonymously or believe that cases rarely lead to real consequences. These misunderstandings leave both honest workers and employers vulnerable, which is why knowing the difference between mistakes and fraud is so important.

• People confuse paperwork errors with fraud; California law targets knowing false statements to get or deny benefits.

• Many think fraud only involves claimants, but employer “premium fraud” and provider schemes also occur.

• Few know you can report suspected fraud anonymously to the state.

• People assume cases rarely move forward, but California reports hundreds of arrests and convictions each year.

In this article, you’ll learn how to avoid these pitfalls and make informed choices.

What Workers’ Comp Fraud Looks Like in California (with Examples)

To separate honest mistakes from intentional fraud, it helps to know how California law defines workers’ compensation fraud and what it looks like in practice. Below are the key definitions, common schemes, and real examples that show how this type of fraud actually occurs.

Why it matters: Understanding the legal definition helps you spot real fraud and avoid false accusations.
What to do: Compare conduct to the law and gather simple facts (dates, bills, pay records, job duties).

Definition: California treats workers’ compensation fraud as making knowingly false or fraudulent statements to obtain or deny benefits. Penalties can include jail and fines.

Examples you can verify:

• Claimant fraud: Exaggerating or fabricating an injury to get benefits.

• Employer premium fraud: Underreporting payroll, misclassifying job duties, or evading experience modification to cut premiums.

• Claim dissuasion: Discouraging or blocking an employee from filing a legitimate claim.

• Provider schemes: Creating false/exaggerated claims, overtreating, or kickbacks.

• Real case example (Los Angeles County): Owners ordered to repay $2.25 million after underreporting $21+ million in payroll to evade premiums.

A Common Mistake: Trying to “Prove” Fraud Yourself

One of the biggest mistakes people make when dealing with suspected workers’ compensation fraud is trying to prove it themselves. While the urge to confront a coworker or employer may feel natural, fraud cases are built on intent and evidence, and only the proper authorities can determine whether fraud has actually occurred.

Why it happens: People feel sure something is wrong and confront coworkers or managers.
Correct approach: Fraud cases turn on intent and material false statements. Preserve records (time cards, wage statements, emails, medical bills), note dates, and report to the right agency. California allows anonymous reports and provides civil immunity for good-faith reports to the Department of Insurance.

For employer premium fraud, list concrete facts (e.g., payroll amounts, job duties, audit results). The state portal shows what details help, underreporting, misclassification, or experience-modification evasion.

What Happens If Fraud Is Proven

When workers’ compensation fraud is proven in California, the consequences are serious. From criminal convictions and heavy fines to jail time and restitution, the state actively enforces penalties to deter fraud and protect the system. Recent enforcement data shows just how often these cases are pursued, and how costly the outcomes can be.

Outcomes: California reports ongoing enforcement. In FY 2023–24, the Fraud Division reported 2,932 suspected cases, 128 arrests, and 156 referrals to prosecutors; DAs reported 260 convictions and $31.5 million in restitution ordered.

Penalties: A conviction can bring up to one year in county jail or two, three, or five years, plus a fine up to $150,000 or double the value of the fraud, and restitution. Failing to carry workers’ compensation insurance can itself be a crime with fines and possible jail.

FAQs

Which is an example of workers’ compensation fraud?

Underreporting payroll to lower premiums, or misclassifying roofers as “office staff,” is fraud.

What is workers’ comp fraud?

Making knowing false statements to obtain or deny workers’ compensation benefits, including false injury claims or schemes to cut required premiums.

How do I prove workers’ comp fraud?

You don’t have to prove it yourself. Save records (payroll, schedules, medical bills, job duties), note dates, and report. Prosecutors evaluate whether there was a knowing and material misrepresentation.

How do I report workers’ comp fraud in Culver City/LA County?

Use the California Department of Insurance Consumer Fraud Reporting Portal (can be anonymous). You can also contact the LA County fraud resources and DA unit listed here.

Is workers’ comp fraud a felony in California?

Yes. California made workers’ compensation fraud a felony offense; sentencing can include jail or prison, fines up to $150,000 or double the fraud, and restitution.

How common is workers’ compensation fraud in California?

The California Department of Insurance investigates thousands of suspected cases each year, with hundreds of arrests and convictions. Fraud costs the state an estimated $1–$3 billion annually, which ultimately raises costs for employers and impacts benefits for legitimate claimants.

What should I do if I’m falsely accused of workers’ comp fraud?

If you are accused, take the matter seriously. Gather documents (medical records, payroll, timecards, communications), avoid direct confrontation, and seek legal counsel immediately. Fraud allegations can lead to criminal charges, so having an attorney defend your rights is essential.

For help with workers’ compensation fraud issues in Culver City, CA, contact Sacks Law Group, APC at (310) 216-7778.